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Why Is Bank Of America So Weak?

Bank of America down 2.2 percent on heavy volume on a day when bank stocks are up; what's going on?

I've been asked about why Bank of America is weak today on heavy volume. The most likely answer is that B of A is in the process of swapping preferred shares into common; that process starts today.

Here's how it will work: the price of the common that holders will be able to convert their preferred shares into will be determined by the volume weighted average price (VWAP) of the common stock, beginning today and for the next five trading sessions.

There is a substantial amount of arbitrage between the preferred and common which is part of the reason volume is so high.

Altogether, about 200 million shares of new common stock will be created.

This has been quite a period of capital raising for the company. Recall that they have already raised about $33 billion of new capital; according to KBW this has taken B of A's share count from 6.4 billion to 8.4 billion; with the 200 million new shares from the swap, it will go to 8.6 billion shares.

And counting.

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